Compliance Corner: FCA, ESMA

Editorial Staff

29 November 2018

Financial Conduct Authority
The Financial Conduct Authority is consulting the financial services sector on how it should handle Brexit if legislators in London refuse to endorse the government’s draft leave package.

The financial watchdog said its paper sets out “additional proposals to prepare for the possibility the UK leaves the European Union on 29 March 2019 without an implementation period” – in other words, no deal. At the weekend, UK Prime Minister Theresa May’s plans were endorsed by European Union heads of state. The House of Commons is due to vote on the plan on 12 December, and many commentators say there is a high chance the package will not be approved.

“The FCA is working to ensure as smooth a transition as possible as the UK prepares to leave the European Union. Earlier this year, we set out the FCA’s role in preparing for Brexit. This consultation, along with those published in October, is an important part of this work,” the FCA said.

The FCA said it is not proposing any policy changes unrelated to Brexit in the consultation paper.

European Securities and Markets Authority
The European Securities and Markets Authority, aka ESMA, late last week said that it welcomed a European Union statement and it will address risks to financial stability if the UK leaves the bloc without a withdrawal agreement.

Financial practitioners, investors and certain political commentators fear that if the UK leaves the bloc without a formal deal – as could happen if UK Prime Minister Theresa May’s plan is rejected by the House of Commons next month – markets could be in turmoil. The EU on 13 November set out how it will act if such a withdrawal takes place. “In such a scenario, the EC has stated that it will adopt a temporary and conditional equivalence decision in order to ensure that there will be no disruption to central clearing,” ESMA said.

“Therefore, ESMA is engaging with the EC to plan, as far as possible, the preparatory actions for the recognition process of UK CCPs in case of a no-deal scenario. ESMA has already started engaging with UK CCPs to carry out preparatory work. The aim is to ensure continued access to UK CCPs for EU clearing members and trading venues as of 30 March 2019, should all the conditions in EMIR, including any conditions set out in the equivalence decision, be fulfilled,” ESMA said.